The adjustment of interregional input-output coefficients under heterogeneous price sensitivity

In this paper, an interregional general equilibrium model is presented which combines a linear structure with factor substitution under heterogeneous price sensitivity among industries. The model is an extension of the MRVIO model proposed by Liew and Liew (1984a, b) and is compared with others in the field of interregional computable general equilibrium models. A simple numerical exercise is carried out to assess the impact of alternative hypotheses (about elasticities of substitution) on the model's performance.This paper was developed during a period of research and study spent at the Centre for Regional Science (CERUM) at Umeå University. Financial support from Svenska Institutet (Stockholm) and Ente L. Einaudi (Rome) is gratefully acknowledged.David Batten, Terry Friesz, Geoffrey Hewings, Börje Johansson, Dino Martellato, Komei Sasaki, Lars Westin and an anonymous referee made useful comments on earlier drafts of this work.